North Korea's Foundation Day Is Here: Will There Be Another Atomic Bomb Test?

The public holiday is this Saturday, and investors are watching for a power move from Pyongyang.

Author:: Kinsey Grant
Publish date:: Sep 8, 2017 6:11 AM EDT

North Korea's Day of the Foundation of the Republic, a public holiday that often goes by the moniker Foundation Day, is coming up on Saturday, Sept. 9, and global investors will be watching closely for a bold move from the rogue nation.

Some prognosticators think the North Korean version of the United States' Independence Day this weekend will bring another missile test.

North Korea tested what most experts believe was a hydrogen bomb on Sunday, Sept. 3, in the country's sixth nuclear test to date. The last nuclear test North Korea conducted was Sept. 9, 2016 -- Foundation Day last year.

The test on Foundation Day a year ago yielded an explosion equivalent to 10 kilotons of TNT, according to a statement from South Korean officials at the time, and triggered a magnitude 5 artificial tremor. For comparison, the atomic bomb dropped on Hiroshima in 1945 exploded with roughly 15 kilotons of energy.

But neither last year's nuclear test or even Hiroshima compared with the weaponry North Korea tested last week. Experts think the hydrogen bomb had a 100-kiloton yield when it triggered a 6.3 magnitude artificial earthquake underground.

On Monday, Sept. 4, South Korea's defense ministry told the country's parliament that intelligence sources had found signs North Korea was preparing for another intercontinental ballistic missile launch. It's unclear if the launch will happen this weekend, but South Korean intelligence suspects a launch could happen on Foundation Day or on the anniversary of the country's Communist Party Foundation Day on Oct. 10.

Foundation Day is among the most important public holidays for the reclusive country, following Day of the Sun, the birthday of Kim Il-sung (leader of North Korea from 1948 until his death in 1994); Day of the Shining Star, which is the birthday of Kim Jong-il (leader from 1994 to 2011); and Party Foundation Day.

Foundation Day celebrates the proclamation of the Democratic People's Republic of Korea, DPRK for short, on Sept. 9, 1948. The DPRK was established after the Supreme People's Assembly promulgated a new communist, militaristic constitution on Sept. 3, 1948, a few years after the 1945 Liberation of Korea.

In the days following recent ICBM tests in North Korea, equities markets have taken a hit while safe-haven assets including U.S. government debt and gold have risen.

It seems investors are already preparing for a North Korean power move this weekend. Even as the equities market achieved moderate gains Wednesday, Sept. 6, U.S. Treasuries staged a rally.

The yield on 10-year notes fell to 2.09% early Thursday, Sept. 7, one day after opening at the lowest level since just after the November presidential election. Treasury yields recorded their steepest one-day decline since May 17 on Tuesday, Sept. 5, falling 9 basis points.

At the same time, gold prices were up $8.90, or 0.66%, to $1,347.90 per ounce on Thursday.

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